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2023 Component Shortage: 5 Key Supply Chain Tactics


In the electronics industry, the 2023 component shortage poses significant challenges, impacting production and supply chains. This shortage, especially in materials like copper and resin, has considerable implications for component manufacturing and requires thorough understanding by businesses and stakeholders.

Understanding the 2023 Component Shortage

Several root causes contribute to the component shortage:

  • The Lingering Impact of COVID-19
    • Shutdowns from 2020-2021 still impact the industry, with raw materials unmined and altered production schedules.
    • The Shutdown’s Residue: 2020-2021 The unprecedented shutdowns during 2020 and 2021 continue to shape the electronic industry. Two primary consequences are:
    • Unmined Raw Materials: The disruptions caused a significant backlog. Essential materials that should have been extracted remained untouched, creating a ripple effect in the production line.
    • Altered Production Schedules: Many manufacturers had to reschedule, postpone, or even cancel their production runs. This restructuring has led to misalignments in supply and demand, causing further delays and complications.
  • High Demand in Commodity Markets:
    • Boost in consumer electronics, increased electronic integration in vehicles, and smart appliances have increased demand.
  • The Russia-Ukraine Conflict:
    • Disruptions in metal and mineral supply for components due to the conflict and sanctions.
  • Material Shortages:
    • Two of the most significant shortages are:
    • Copper: Often utilized as conductors in various electronic components, copper’s shortage has a direct effect on the production of a wide array of devices.
    • Resin: As a primary material for encapsulating and protecting electronic components, the scarcity of resin presents challenges in ensuring the longevity and reliability of the produced components.

Proactive Solutions for Navigating the Shortage

  1. Implement Advanced Inventory Management
    • Early Component Availability Assessment:
      • Design Phase Insight: By evaluating component availability early, businesses can forecast potential procurement challenges.
      • Risk Minimization: Avoid last-minute design changes or production halts due to unavailable components.
    • Multiple Sourcing:
      • Continuous Supply: Diversifying sources ensures that if one supplier faces shortages, others can fill the gap.
      • Competitive Pricing: Engaging with multiple suppliers can lead to better pricing negotiations.
    • Bulk Ordering:
      • Cost Savings: Purchasing components in large quantities can lead to volume discounts.
      • Securing Stock: Preemptively ordering ensures you have essential components before market shortages intensify.
  2. Leverage Component Database Software
  1. Obsolescence Forecasting:
    • Future Planning: Understand which components are being phased out to adapt procurement strategies.
    • Budget Management: Planning for replacements can help manage costs more effectively.
  2. Real-time Inventory Data:
    • Production Scheduling: Real-time data aids in adjusting production timelines based on component availability.
    • Supplier Engagement: Quick insights can help engage with suppliers on immediate needs.
  3. Compliance Information:
    • Regulatory Adherence: Ensure your components don’t violate international standards or regulations.
    • Brand Reputation: Avoiding restricted materials can safeguard against public relations issues.
  4. Forge Strong Relationships with Distributors
    • Inventory Management:
      • Diversified Sourcing: Distributors often have networks of suppliers, increasing component sourcing options.
      • Consolidated Ordering: Simplify procurement processes by consolidating orders through a single distributor.
    • Forecasting:
      • Market Trends: Rely on distributor insights to understand upcoming market shifts.
      • Proactive Adjustments: Make early strategy adjustments based on anticipated market changes.
    • Warehousing:
      • Storage Solutions: Utilizing distributor warehousing can help businesses lacking storage space.
      • Quick Access: Having stock close-by can speed up production timelines.
    • Franchise Pricing:
      • Cost Efficiency: Access to special pricing models can lead to significant cost reductions.
      • Competitive Edge: Offering products at competitive prices can enhance market positioning.
  5. Consider Reshoring Your Electronics Manufacturing
    • Faster Lead Times:
      • Localized Production: Cutting out international transit can significantly speed up product availability.
      • Customs & Tariffs: Reduce or eliminate delays associated with customs checks and duties.
    • Enhanced Quality Control:
      • Direct Oversight: Closer proximity allows for direct quality checks.
      • Immediate Corrections: Identify and rectify issues without extensive back-and-forth with overseas manufacturers.
    • Improved Communication:
      • Synchronized Working Hours: Working in the same time zone improves workflow.
      • Clearer Interactions: Removing language barriers can prevent misunderstandings.
  6. Adapt Your Design for Component Availability
PCB components
  1. Redesign:
    • Optimization: Streamlining designs can lead to cost and time savings.
    • Modernization: Update older designs to fit current market demands and component availability.
  2. Replacement:
    • Alternative Sourcing: Identifying common components can make procurement easier and cheaper.
    • Component Testing: Ensure that replacements don’t compromise product quality or functionality.
  3. Reprioritization:
    • Strategic Assessment: Consider whether tweaks to existing designs offer better ROI than entirely new designs.
    • Market Alignment: Align design decisions with current market needs and trends.

Conclusion: Charting a Course for Success in 2023

Adopting proactive strategies is crucial for managing supply chain challenges. Effective communication is the foundation of a successful electronic component supply network. By employing the above measures, organizations can confidently navigate the 2023 electronic component shortage, ensuring timely project completion without cost overruns.

2023 Component Shortage: 5 Key Supply Chain Tactics
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2023 Component Shortage: 5 Key Supply Chain Tactics
The 2023 component shortage has intensified, prompting electronics manufacturers to adopt five key supply chain tactics to navigate challenges and maintain production.
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